Evening Report: April 5, 2022

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U.S. trade deficit narrows... February’s U.S. trade deficit declined less than $100 million from January’s revised $89.2 billion record, according to the U.S. Census Bureau. February exports were a record $228.6 billion, $4.1 billion more than January. February imports were $317.8 billion, $4.1 billion more than January imports. It was the fourth straight month imports have been $300 billion or more. Year-to-date, the total trade deficit increased $45.7 billion or 34.5% from 2021. Exports increased $68.0 billion or 17.6%. Imports increased $113.7 billion or 22.0%.

U.S. ag trade surplus increases... USDA reports the ag sector had a trade surplus of nearly $1.2 billion in February, up $1.0 billion from January. February’s ag exports totaled $15.6 billion, down from $15.9 billion in January. Ag imports for February were $14.5 billion, down $1.3 billion from January. Through the first five months of fiscal year (FY) 2022, U.S. agriculture is running a $9.1 billion surplus, with $84.1 billion of exports and $75.0 billion of imports. USDA forecasts a $10.5 billion ag trade surplus for FY 2022. The heaviest period for U.S. ag exports is through the first several months of the fiscal year, while imports typically pick up during spring.


Ag Economy Barometer drops amid war’s effect on input prices... The Purdue University/CME Group Ag Economy Barometer dipped to 113 in March, down 12 points from February and 36% lower than a year ago, marking the weakest farmer sentiment reading since May 2020. The decline was driven by producers' weaker perceptions of current conditions and future expectations. The Index of Current Conditions declined 19 points to 113, down 44% from March 2021. The Index of Future Expectations fell 9 points to 113, down 31% from last year.

The March survey provided the first opportunity to ask producers how they expect the war in Ukraine to affect U.S. agriculture. Producers overwhelmingly said they expect input prices to be most affected (63%), followed by crop prices (33%) and livestock prices (3%).

Lawmakers ask Biden for fertilizer price relief... A group of lawmakers sent a letter to President Joe Biden asking him to review all available options to lower the cost of fertilizer, including increasing domestic natural gas production. The letter was led by Representatives Tom Emmer (R-Minn.), Pete Stauber (R-Minn.), Michelle Fischbach (R-Minn.), Greg Murphy (R-N.C.) and Jodey Arrington (R-Texas). Some of the other options listed in the letter included lifting the cross-border vaccine mandate for transporters of essential commerce, approving pending liquefied natural gas export permits and having USDA provide support for farmers.

Firms raise Brazil’s corn production estimate... StoneX and Safras & Mercado both raised their estimates for Brazil’s corn production. Commodity brokerage firm StoneX raised its total Brazil corn production forecast to 118.6 MMT, up 2.5 MT from its March forecast. The increase came from raising Brazil’s safrinha corn crop from 89.38 MMT to 91.9 MMT. Ag consultancy Safras & Mercado increased its Brazil corn production forecast to 118.155 MMT, up 2.47 MMT from February outlook. The increase was primarily due to the consultancy raising its estimate of the number of corn hectares planted by 89,000 to 14.669 million hectares.

Brazil and Belarus trying to find a way to trade potash... Brazil and Belarus are trying to find a way to ship potash from the Black Sea region to South America, Bloomberg reported. Belarusian President Alexander Lukashenko has approved smaller companies in his country to sell fertilizer to take advantage of higher prices. However, the issue is U.S. and EU sanctions on Belarus that prevent fertilizer shipments. Some industry sources say Brazil might have to barter or use Chinese currency and a Chinese intermediary to help facilitate the transaction.

Argentina raises ethanol prices... Argentine domestic prices for sugar and corn-based ethanol were raised from 59 cents per liter to 66 cents per liter, according to an announcement in the official gazette. The government regularly updates the biofuel price.

Egypt's Russian wheat imports increased... Egypt imported 479,195 MT of wheat from Russia in March, up 24% from a year ago. Ukraine wheat exports to Egypt totaled 124,500 MT, down 42% from 2021. Traders note shipping slowed down at the start of the invasion and then picked up in March with either new contracts or ones signed before the war. Egyptian importers are still figuring out a secure payment channel to pay for Russian wheat. Egypt also has been looking at alternate wheat supplies. The country has a 2.6-month supply, below the government’s six-month target. However, its reserves will increase when the domestic harvest starts this month.
 

Large Chinese crushing plant damaged in Ukraine... Fighting around Mariupol in March damaged a Cofco Corp. sunflower seed crushing plant in Ukraine, Bloomberg reported. The plant can produce 1,500 MT of vegetable oil per day or about 10% of Ukraine’s supply and is the Chinese company’s only one in the country. The extent of the damage isn’t known. However, two main buildings have several holes. Dozens of bomb craters are around the facility. The facility also has a storage and a rail terminal connecting the plant to Cofco’s export terminal.

 

Putin: Western sanctions causing global food crisis... Russian President Vladimir Putin said Western sanctions would lead to more food shortages. He explained sanctions had disrupted fertilizer supply logistics from Russia and Belarus. Putin added higher natural gas prices made fertilizer production more expensive in the West. He predicted Western countries would print more money to make purchases and lead to food shortages in poor countries. As a result, food shortages will increase and cause waves of migration and higher food prices. Putin reiterated his country needed to be careful with food exports to “hostile” countries. 

Mexico president asks for Vilsack’s help on food inflation... Mexican President Andres Manuel Lopez Obrador has asked USDA Secretary Tom Vilsack to work with Mexican Agriculture Minister Victor Villalobos to fight rising food inflation. Vilsack is in Mexico meeting with Villalobos to talk about cooperation opening up trade between the countries.
 

Mexico to allow U.S. potatoes nationwide by May 15... Following meetings between Vilsack and Villalobos, USDA announced Mexico would expand access to the entire Mexican market no later than May 15 for all U.S. table stock and chipping potatoes. U.S. and Mexico have concluded all necessary plant health protocols and agreed to a final visit by Mexican officials in April to finalize expanded access for U.S. potatoes to the entire Mexican market.